Lion's Gate Water v. D'ANTONIO

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2009-NMSC-057

Filing Date: December 2, 2009

Docket No. 31,279

LION’S GATE WATER,

Plaintiff-Respondent,

v.

JOHN D’ANTONIO, JR., State Engineer
for the State of New Mexico,

Defendant-Petitioner.

ORIGINAL PROCEEDING ON CERTIORARI
J.C. Robinson, District Judge

DL Sanders, Chief Counsel
Jonathan E. Sperber, Special Assistant Attorney General
Office of the State Engineer
Santa Fe, NM

for Petitioner

Hubert & Hernandez, LLC
Lee E. Peters
Las Cruces, NM

for Respondent

OPINION

CHÁVEZ, Chief Justice.

{1} This case comes to us through a long and tortuous route, wending its way from the
Office of the State Engineer to this Court over the course of more than six years. The present
iteration of judicial review arose when the Sixth Judicial District Court entered an interim
order on May 29, 2008, finding that Respondent Lion’s Gate Water’s notice publication
“substantially complied” with the statutory requirement and ordering a trial de novo on “all

1
matters either presented or which might have been presented to [the State Engineer] as well
as new evidence developed since the administrative hearing.” The State Engineer appealed
the interim order and the Court of Appeals denied his application for interlocutory appeal.
The State Engineer then filed a petition for writ of certiorari to this Court. We granted
certiorari on September 9, 2008, to review all issues raised in the petition. Lion’s Gate v.
D’Antonio, 2008-NMCERT-009, 145 N.M. 258, 196 P.3d 489.

{2} We hold that the district court is limited to a de novo review of the issue before the
State Engineer, which was solely whether water is available for appropriation. We also hold
that notice publication of an application for a permit to appropriate water in a form
prescribed by the State Engineer is necessary only if water is found to be available, either
through an initial determination by the State Engineer or following a ruling by the district
court on appeal. The State Engineer may decline to order notice publication if he or she
determines that water is unavailable because no third-party rights are implicated. Lion’s
Gate’s publication of notice has no legal effect because (1) publication followed the State
Engineer’s determination that water was unavailable, making notice unnecessary; (2) Lion’s
Gate was not instructed by the State Engineer to publish notice, as required by statute; and
(3) notice was not published in a form prescribed by the State Engineer, as required by
statute. Accordingly, we reverse and remand for further proceedings consistent with this
opinion.

I. BACKGROUND

{3} A detailed recapitulation of the procedural history of this case and of the history of
water appropriation from the Gila River is necessary to understand the current posture of this
dispute. In February 2003, Lion’s Gate submitted an application to the Water Rights
Division of the Office of the State Engineer for a permit to appropriate new water from the
Gila River in southwestern New Mexico. Applications for permits to appropriate water and
appeals to district court are governed by Chapter 72 of the New Mexico statutes. The State
Engineer interprets these enabling statutes to require him, if he determines that no
unappropriated water is available, to summarily reject applications to appropriate water, see
NMSA 1978, § 72-5-7 (1985), as not being “in the form required by the rules and regulations
established by him.” NMSA 1978, § 72-5-1 (1907, as amended through 1979). It is at this
point that Lion’s Gate’s application ran afoul of the State Engineer’s administrative process.

{4} As early as 1935, when United States v. Gila Valley Irrigation District (D. Ct. Ariz.
1935) was entered as the first decree adjudicating Gila River water rights, water in the Gila
River has been in scarce supply. By 1960, it was recognized that the Gila was
overappropriated as “the supply of water presently available and which seems likely to be
available in the future is not sufficient to satisfy the needs and demands of existing projects.”
Special Master Report, Simon H. Rifkind, 325, 337, Dec. 5, 1960, in Ariz. v. Cal., 376 U.S.
340 (1964). The Gila Decree, also known as Globe Equity No. 59, served as the foundation
for the 1964 apportionment in Arizona v. California of New Mexico’s share of the Colorado
River and its tributaries. 376 U.S. at 348-49; Rifkind at 327-28. In Arizona v. California,

2
the United States Supreme Court, pursuant to the Gila Decree, apportioned New Mexico’s
share of the Colorado River, of which the Gila is a tributary. The Arizona v. California
decree enjoins “[t]he State of New Mexico, its officers, attorneys, agents and employees”
from “diverting or permitting the diversion of water from the Gila River,” except as provided
by the decree. Ariz. v. Cal., 376 U.S. at 347-48. The decree limits Gila diversions in New
Mexico to 136,620 acre feet of water during any period of ten consecutive years and to
15,895 acre feet during any single year. Id. at 348. It further prohibits diversion or
permitting the diversion of water from the Gila “except for use on lands determined to have
the right to the use of such water” by Globe Equity No. 59. Id. at 348-49.

{5} In New Mexico ex rel. Reynolds v. Anderson, Cause No. 16290 (D. Grant County,
N.M. 1967) (final judgment and decree), the Sixth Judicial District Court subsequently
adjudicated the use of New Mexico’s apportioned share of the Gila River system water and,
pursuant to the Arizona v. California decree, enjoined the State Engineer “from permitting
new uses of water within the Gila River Stream System which would cause the total of uses
therefrom to exceed the limitations decreed by the United States Supreme Court in Arizona
v. California[.]” Id. at 5 (emphasis added). Under the Arizona v. California decree, the total
number of irrigated acres allowed in the Gila River system in New Mexico is 7,057, but
according to State Engineer records, the number of adjudicated and permitted irrigated acres
in New Mexico is 7,177, meaning the irrigated acreage in New Mexico exceeds the Arizona
v. California decree by approximately 120 acres. Similarly, the Arizona v. California decree
also limits consumptive use of water in the New Mexico Gila River system to 136,620 acre
feet during any period of ten consecutive years, while State Engineer records indicate that
the actual adjudicated and permitted consumptive use is 149,610 acre feet during any period
of ten consecutive years, resulting in an actual consumptive use in New Mexico of 12,990
acre feet more than the decree permits. While it appears that some unappropriated water was
available for water users in New Mexico following the Arizona v. California and Anderson
decrees, all of that water was already spoken for by applications for permits to appropriate
that had been pending before the resolution of those lawsuits.

{6} After apportionment of the Gila River had been established through the Arizona v.
California decree, in 1968 Congress created an opportunity for the use of additional Gila
River water in New Mexico in excess of the amounts decreed, but only by contracting for
that water with the Secretary of the Interior.1 Colorado River Basin Project Act § 304(f), 43
U.S.C. § 1524(f)(1) (2004) (providing that “the Secretary [of the Interior] shall offer to
contract with water users in the State of New Mexico . . . for water from the Gila River” for
the consumptive use of up to an annual average of 18,000 acre feet for any given ten-year

1
Lion’s Gate was well aware of the federal law requiring a contract with the Secretary
of the Department of the Interior to make use of the additional 18,000 acre feet of Gila River
water, as evidenced by its lawsuit seeking declaratory relief against then-Department of the
Interior Secretary Gale Norton and its four “written acceptance[s]” of the Department of the
Interior’s mandatory offer to contract.

3
period).2,3

{7} Accordingly, the Water Rights Division of the State Engineer’s Office determined
that no unappropriated water was available for Lion’s Gate, and summarily rejected its initial
application and each of its subsequent seven amended applications pursuant to Section 72-5-
7. In this regard, none of Lion’s Gate’s applications fared any better than dozens of previous
permit applications dating back to 1969 seeking to appropriate water from the Gila.

{8} Despite the rejection of its application and amended applications, Lion’s Gate
initiated notice publication of its application for a permit to appropriate water on March 14,
2003. The State Engineer apparently contacted the newspaper carrying the notice to request
that it terminate publication, presumably for the reason that Lion’s Gate’s notice did not
strictly comply with NMSA 1978, Section 72-5-4 (2001), which requires the State Engineer
to prescribe the notice’s form to authorize its publication. After threatening litigation over
the termination of its notice publication, Lion’s Gate demanded an administrative hearing
to review the State Engineer’s summary rejection of its amended application, acknowledging
that pursuant to NMSA 1978, Section 72-2-16 (1973), a hearing is required before the State
Engineer’s decision can be appealed to district court.

{9} Notwithstanding this acknowledgment, Lion’s Gate filed an appeal of the rejection
of its initial application and its first and second amended applications to the Sixth Judicial
District Court on the following day. In the following weeks, Lion’s Gate filed with the
district court three additional appeals of the State Engineer’s summary rejections of its third,
fourth, fifth, sixth, and seventh amended applications. Lion’s Gate argued that further
administrative review by way of a hearing under Section 72-2-16 was futile, given the State
Engineer’s firm position on the matter. Lion’s Gate also argued that the right to a de novo
hearing under New Mexico Constitution Article XVI, Section 54 and NMSA 1978, Section

2
The Act was later amended by the Arizona Water Settlements Act §§ 202, 212, 43
U.S.C. § 1501 (2006), reducing the additional amount of Gila River water available for
contract to 14,000 acre feet and conditioning the right to contract on the Secretary of the
Interior’s execution of the New Mexico Consumptive Use and Forbearance Agreement,
which in turn must be “executed by all signatory parties and approved by the State of New
Mexico.” Id.
3
The Act contains no further instructions, guidance, or language explaining how one
might go about contracting with the Secretary or how the Secretary should go about deciding
who should get the water.
4
Article XVI, Section 5 provides: “In any appeal to the district court from the
decision, act or refusal to act of any state executive officer or body in matters relating to
water rights, the proceeding upon appeal shall be de novo as cases originally docketed in the
district court unless otherwise provided by law.”

4
72-7-1(E) (1971),5 further obviated the need for additional administrative action because the
district court, through the provision for de novo review, has jurisdiction over the matter. In
doing so, Lion’s Gate apparently changed its position within twenty-four hours,
contradicting its letter to the State Engineer demanding a hearing so its application could be
appealed to the district court, and argued to the district court that its appeals were proper,
even without a hearing, because Section 72-5-7 grants the State Engineer authority to
summarily reject an application, thereby creating opportunity for a “short-circuit” of the
usual administrative process otherwise provided for by New Mexico’s water code.6
Following the State Engineer’s rejection of the last amended application in April 2003,
Lion’s Gate again initiated publication of notice. This time publication was not curtailed by
the State Engineer and notice ran for the statutory period, once a week for three consecutive
weeks, though its form had not been prescribed by the State Engineer and Lion’s Gate’s
application and the last of its amended applications had already been rejected.

{10} In the interim, the State Engineer continued to prepare for an administrative hearing
as requested by Lion’s Gate, notwithstanding Lion’s Gate’s appeals to the Sixth Judicial
District Court. Accordingly, the State Engineer argued before the district court, inter alia,
that administrative remedies had not been exhausted as required by Section 72-2-16 and that
Lion’s Gate’s claim should be dismissed. The Sixth Judicial District Court issued a final
judgment dismissing Lion’s Gate’s appeal, finding the appeal premature as administrative
remedies were not exhausted because a State Engineer hearing was required by Section 72-2-
16 prior to an appeal.

{11} Nearly one year later, the State Engineer ordered “[t]he sole issue to be addressed in
[the hearing] is whether or not [Lion’s Gate] can demonstrate, to the satisfaction of the State

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Section 72-7-1(E) provides:

The proceeding upon appeal shall be de novo as cases originally docketed in
the district court. Evidence taken in a hearing before the state engineer may
be considered as original evidence subject to legal objection, the same as if
the evidence was originally offered in the district court. The court shall
allow all amendments which may be necessary in furtherance of justice and
may submit any question of fact arising therein to a jury or to one or more
referees at its discretion.
6
Interestingly, considering the contrary positions later taken in its briefs to this Court,
Lion’s Gate argued that under Section 72-5-7, the State Engineer was required “to
summarily reject an application upon his determination that ‘there is no unappropriated
water available.’” Once such a determination is made, even without a hearing, “[f]urther
administrative consideration of a rejected application under this statute is pointless because
the statute constrains any further exercise of the State Engineer’s discretion.”

5
Engineer, that unappropriated water does exist[.]” In response, Lion’s Gate again appealed
to the Sixth Judicial District Court, arguing that “[t]he State Engineer has illegally denied
Lion’s Gate Water its constitutional right to fair and unbiased treatment of its Application”
by limiting the issues to be heard. In addition, Lion’s Gate argued that NMSA 1978, Section
72-5-6 (1985),7 provides that the State Engineer can find that water is unavailable only “from
the evidence presented by the parties interested” and must at the same time determine
whether “the proposed appropriation is not contrary to the conservation of water,” id.,
whether it “is not detrimental to the public welfare of the state,” id., and whether it violates
the rights of other water users, citing NMSA 1978, Section 72-5-5(A) (1985).8 Thus,
although Lion’s Gate originally acknowledged that an application could be summarily
rejected under Section 72-5-7 for failure to “comply with the requirements of the law and
rules and regulations[,]” or where “contrary to the conservation of water within the state or
detrimental to the public welfare of the state[,]” id., it now argued that denial for lack of
unappropriated water could only occur after a hearing of the type described in Section 72-5-
6.

{12} Lion’s Gate now argued the following: (1) that it was no longer required to exhaust
administrative remedies because Section 72-7-1(A) provides for court review of “any
decision, act or refusal to act of the state engineer”; (2) that the State Engineer’s limiting
order was a “decision” and that it denied Lion’s Gate its right to a fair hearing by improperly
proscribing the issues relevant to a permit application; and (3) that because the State
Engineer was proceeding improperly, and because appeals to the district court are de novo,

7
Section 72-5-6 provides:

Upon the receipt of the proofs of publication, accompanied by any statutory
fees required at this time, the state engineer shall determine, from the
evidence presented by the parties interested, from such surveys of the water
supply as may be available and from the records, whether there is
unappropriated water available for the benefit of the applicant. If so, and if
the proposed appropriation is not contrary to the conservation of water within
the state and is not detrimental to the public welfare of the state, the state
engineer shall endorse his approval on the application, which shall become
a permit to appropriate water[.]
8
Section 72-5-5(A) provides:

Whenever an application is filed which requires advertisement by virtue of
the provisions of Chapter 72, Article 5 NMSA 1978, the advertisement shall
state that objections or protests to the granting of the application may be filed
with the state engineer within ten days after the last publication of the notice.
If objection or protest is timely filed, the state engineer shall advise interested
parties, and a hearing shall be held as otherwise provided by statute.

6
the district court should consider all relevant issues regarding its application and decide for
itself the merits of Lion’s Gate’s permit application in the first instance.

{13} The district court again agreed with the State Engineer, finding in March 2005 that
“[t]here is no statutory basis for Plaintiff to appeal prior to exhausting its administrative
remedies.” Denying a subsequent motion for reconsideration, the district court explained
that it would not review non-final decisions of a hearing officer, and that “[i]t appears [that]
the hearing officer intends to decide the threshold issue of whether there is water subject to
appropriation. If there is, the Office of the State Engineer has a duty to proceed with other
issues.” On remand to the State Engineer, the Water Rights Division moved for summary
judgment in September 2006, on the grounds that no unappropriated water was available for
Lion’s Gate’s permit application. Lion’s Gate cross-motioned for summary judgment,
arguing that the State Engineer was attempting to replace itself or other governmental
entities in southwestern New Mexico as the applicant for the Gila River water and it was
denied the opportunity for discovery on that issue. As a consequence, Lion’s Gate
contended that it was denied a right to fully argue “issue number one, the availability of
water.” The hearing examiner for the State Engineer’s Office, finding that there was no
dispute of material fact, granted the Water Rights Division’s motion for summary judgment
in August 2007.

{14} Lion’s Gate returned to the Sixth Judicial District Court in September 2007 to appeal
the State Engineer’s summary judgment. In December 2007, Lion’s Gate moved the district
court to establish appropriate procedures to reflect that its appeal under New Mexico
Constitution Article XVI, Section 5, and Section 72-7-1(E) was “to be treated as an original
case on the docket of this Court.” The State Engineer responded that the de novo standard
of review is broad, but applies only to “an underlying administrative decision of the State
Engineer.” The district court’s ruling was somewhat ambiguous, providing that “[t]he Court
may consider both new evidence and any evidence previously introduced at the
administrative hearing” and that “[p]revious limitations on discovery, if any, do not apply
to this appeal.” Evidently seeking further clarification, Lion’s Gate moved the district court
to “allow[] Lion’s Gate a trial de novo on all issues pertaining to its Application,” as it was
stuck in “a procedural quagmire of never-ending administrative hearings and appeals.”
Lion’s Gate maintained that because (1) it had a right to trial de novo by statute and under
the state constitution, (2) no objections had been filed regarding its published notice, and (3)
the State Engineer had violated his statutory duties, the district court should hear all issues
relating to the application rather than only reviewing the State Engineer’s grant of summary
judgment. The State Engineer argued that the district court’s review should be limited to the
issue decided below—whether water is available for appropriation—and that giving legal
effect to Lion’s Gate’s notice publication could deny interested parties the right to participate
in proceedings.

{15} On May 29, 2008, the district court granted trial de novo on all issues and made
several findings now relevant on review:

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 13. [The State Engineer] admits it never held an evidentiary hearing on
this matter despite representing to the Court that it would in both the
2003 and 2004 appeals. Instead, it made its decision based on
summary judgment without evidentiary hearing.

....

35. [The State Engineer] failed in its statutory obligation to provide
notice of [Lion’s Gate’s] application.

....

37. [Lion’s Gate’s] notice substantially complied with the notice statute
and was sufficient to put the public on notice of their right to object.

38. No objections were filed.

....

49. This Court has jurisdiction to hear all matters either presented or
which might have been presented to [the State Engineer] as well as
new evidence developed since the administrative hearing.

The district court has not ruled whether the State Engineer’s grant of summary judgment was
proper.

II. DISCUSSION

{16} We are asked to determine the meaning and purpose of New Mexico Constitution
Article XVI, Section 5 and Section 72-7-1(E), which define the standard of review for
appeals from the State Engineer to district court, and whether the Sixth Judicial District
Court erred when it found that it has “jurisdiction to hear all matters either presented or
which might have been presented to [the State Engineer] as well as new evidence developed
since the administrative hearing.” In addition, we are asked to determine the meaning of
Sections 72-5-4 and 72-5-7, which govern the procedure for publishing notice of applications
for permits to appropriate water, and whether Lion’s Gate’s notice publication substantially
complied with the process prescribed by the statutes.

{17} We conclude that a district court is limited to a de novo review of the issues decided
by the State Engineer, which in this case is whether water is available for appropriation. We
also hold that the water code requires publication of an application for a permit to
appropriate only if water is found to be available by the State Engineer or by a district court
on appeal, because no third-party rights are implicated unless water is available. Therefore,
the State Engineer must order notice publication in a form prescribed by him or her if water

8
is deemed to be available. In this case, because notice was not published in accord with the
State Engineer’s prescribed form and was published following the State Engineer’s
determination that water was unavailable, Lion’s Gate’s self-published notice was
unnecessary, unauthorized, and consequently of no legal effect.

A. STANDARD OF REVIEW

{18} Our analysis is one of statutory construction, which is an issue of law; accordingly,
we review the district court’s findings and order de novo. N.M. Indus. Energy Consumers
v. N.M. Pub. Regulation Comm’n, 2007-NMSC-053, ¶ 19, 142 N.M. 533, 168 P.3d 105.
Also reviewed de novo is the extent of a court’s appellate jurisdiction, which is a question
of law. City of Las Cruces v. Sanchez, 2007-NMSC-042, ¶ 7, 142 N.M. 243, 164 P.3d 942.

B. DE NOVO REVIEW UNDER ARTICLE XVI, SECTION 5 AND SECTION 72-
7-1(E)

{19} The standard of review normally applied by appellate courts to administrative
decisions is found in Rule 1-074(R) NMRA. It provides that judicial review is limited to
determining

(1) whether the agency acted fraudulently, arbitrarily or capriciously; (2)
whether based upon the whole record on appeal, the decision of the agency
is not supported by substantial evidence; (3) whether the action of the agency
was outside the scope of authority of the agency; or (4) whether the action of
the agency was otherwise not in accordance with law.

Id.; see Johnson v. Sanchez, 67 N.M. 41, 48-49, 351 P.2d 449, 454 (1960) (stating that the
general rule guiding review of administrative agency appeals in New Mexico is that “the
questions to be answered by the court are questions of law and are actually restricted to
whether the administrative body acted fraudulently, arbitrarily or capriciously, whether the
order was supported by substantial evidence, and, generally, whether the action of the
administrative head was within the scope of his authority”). However, Section 72-7-1(E),
reflecting a constitutional provision that is peculiar to water rights administration and the
State Engineer, requires that appeals from the agency are to be reviewed “de novo as cases
originally docketed in the district court.” Id.; N.M. Const. art. XVI, § 5. Section 72-7-1(E)
contemplates a new adjudication, allowing for “all amendments which may be necessary in
furtherance of justice.” Town of Silver City v. Scartaccini, 2006-NMCA-009, ¶ 9, 138 N.M.
813, 126 P.3d 1177 (quoting § 72-7-1(E) (internal quotation marks omitted)). Section 72-7-
1(E), therefore, supersedes the general rule for judicial review of administrative agency
appeals.

{20} To understand the scope of de novo review of State Engineer actions as provided
under Section 72-7-1(E) and pursuant to Article XVI, Section 5, it is necessary to review the
history of these provisions and their development in New Mexico’s water code. New

9
Mexico had already codified its current system of water laws by 1907, even before statehood
in 1912 and the adoption of the state constitution in 1911, creating an exclusive and
comprehensive means of acquiring water rights through the State Engineer. Section 72-5-1
(providing the only way to acquire a water right is to “make an application to the state
engineer for a permit to appropriate, in the form required by the rules and regulations
established by him”); see State ex rel. Reynolds v. Aamodt, 111 N.M. 4, 5, 800 P.2d 1061,
1062 (1990) (finding that “[t]he legislature granted the State Engineer broad powers to
implement and enforce the water laws administered by him”). The 1907 codification of New
Mexico’s water law, which was a declaration of the common law as it then existed, see
Hagerman Irrigation Co. v. McMurry, 16 N.M. 172, 180, 113 P. 823, 825 (1911), included
a provision that “the decision, act or refusal to act of the territorial engineer” was appealable
to a Board of Water Commissioners, whose decision could be appealed in turn to the district
court. 1907 N.M. Laws, ch. 49, §§ 63, 65. The 1907 law provided that appeals to the district
court

shall be tried de novo, except that evidence which may have been taken in the
hearing before the territorial engineer and said board and transcribed, may be
considered as original evidence in the district court, and the court shall allow
all amendments which may be necessary in furtherance of justice in all cases,
appealed by petition or certiorari, or otherwise, and may submit any question
of fact arising therein to a jury, or to one or more referees at its discretion.

Id. § 65 (emphasis added). This provision of the law was interpreted broadly at the time by
this Court:

The court may consider such evidence as has been introduced before the
board and engineer, and transcribed and filed with it, but it also hears
additional evidence, and is not called upon to determine whether the engineer
or the Board of Water Commissioners erred in the action taken and order
entered, but must form its own conclusion and enter such judgment, as the
proof warrants and the law requires. It does not review the discretion of the
engineer or the board, but determines, as in this case it was required by the
issue presented, whether appellee’s application to appropriate water should
be granted. The court, in order to form a conclusion upon the issues, was
necessarily required to determine, for itself, whether there was
unappropriated water available; whether the approval of the application
would be contrary to the public interest, and all other questions which the
engineer was required, in the first instance, to determine. In such case the
question recurs anew, as to whether the application shall be granted.

Farmers’ Dev. Co. v. Rayado Land & Irrigation Co., 18 N.M. 1, 9-10, 133 P. 104, 106
(1913), overruled in part by Kelley v. Carlsbad Irrigation Dist., 71 N.M. 464, 467, 379 P.2d
763, 764 (1963).

10
{21} Farmers’ interpretation of the scope of the district court’s de novo review under the
water code endured until this Court reconsidered the statute in Kelley in light of our
separation of powers clause. 71 N.M. at 466-67, 379 P.2d at 763-65, superseded by statute,
N.M. Const. art. XVI, § 5, as recognized in Application of Carlsbad Irrigation Dist., 87
N.M. 149, 151, 530 P.2d 943, 945 (1974). This Court found that “the net effect of the
admission and consideration by the trial court of . . . additional evidence . . . inevitably leads
to the substitution of the court’s discretion for that of the expert administrative body.”
Kelley, 71 N.M. at 466, 379 P.2d at 764 (quoting Cont’l Oil Co. v. Oil Conservation
Comm’n, 70 N.M. 310, 325, 373 P.2d 809, 819 (1962) (internal quotation marks omitted)).
Following this reasoning, Kelley held that the de novo provision of the statute

does not permit the district court, in reviewing a decision of the state
engineer, to hear new or additional evidence. The review by the court is
limited to questions of law and restricted to whether, based upon the legal
evidence produced at the hearing before the state engineer, that officer acted
fraudulently, arbitrarily or capriciously; whether his action was substantially
supported by the evidence; or, whether the action was within the scope of
state engineer’s authority.

Id. at 467, 379 P.2d at 764; see also Durand v. Reynolds, 75 N.M. 497, 499, 406 P.2d 817,
818 (1965) (“Thus the question that must be answered by this court is whether or not the
findings of the state engineer are supported by substantial evidence; and if so, did the court
properly apply the law?”); Bennett v. State Corp. Comm’n, 73 N.M. 126, 128, 385 P.2d 978,
980 (1963) (“Review by the district court, and by this court on appeal, is limited to questions
of law, and is restricted to whether the commission's findings and order were supported by
substantial evidence; were within the scope of its authority; and, whether the action was
unlawful, arbitrary, capricious or unreasonable.”); Ingram v. Malone Farms, Inc., 72 N.M.
256, 258, 382 P.2d 981, 982 (1963) (holding that under Kelley district court was not
permitted to hear new or additional evidence on review); Cross v. Erickson, 72 N.M. 73, 75,
380 P.2d 520, 521 (1963) (holding admission and consideration of expert testimony in
district court was contrary to the holding of Kelley and therefore inadmissible); McGee v.
State ex rel. Reynolds, 72 N.M. 48, 49, 380 P.2d 195, 195 (1963) (“[T]he district court in
reviewing the decision of the State Engineer is not permitted under the statute . . . to hear
new or additional evidence.”).

{22} In response to Kelley and the subsequent cases overturning district court reviews of
administrative agency actions, the New Mexico Constitutional Commission proposed an
amendment to Article XVI that was adopted in November 1967. N.M. Const. art. XVI, § 5.
The new section to Article XVI provides that “[i]n any appeal to the district court from the
decision, act or refusal to act of any state executive officer or body in matters relating to
water rights, the proceeding upon appeal shall be de novo as cases originally docketed in the
district court unless otherwise provided by law.” Id. Then in 1971, the Legislature passed
amendments to what is now Section 72-7-1, adding the Section 5 language, “as cases
originally docketed,” to the State Engineer appeal statute. 1971 N.M. Laws, ch. 134, § 2.

11
Subsequently, when the meaning of the language was litigated, this Court rightly found that

[t]here can be no doubt that the constitutional and statutory provisions for a
proceeding de novo as cases originally docketed in the district court are
inconsistent with our decision in Kelly v. Carlsbad Irrigation District, . . .
insofar as we held that on appeals from the engineer: (1) The district court
cannot hear new or additional evidence. (2) The district court cannot form
its own conclusions based upon new or additional evidence. (3) The district
court’s review of a decision of the Engineer:

. . . is limited to questions of law and restricted to whether,
based upon the legal evidence produced at the hearing before
the state engineer, that officer acted fraudulently, arbitrarily
or capriciously; whether his action was substantially
supported by the evidence; or, whether the action was within
the scope of state engineer’s authority.

Carlsbad Irrigation Dist., 87 N.M. at 151, 530 P.2d at 945 (quoting Kelley, 71 N.M. at 467,
379 P.2d at 764 (internal quotation marks omitted)). The Court went on to comment that

[c]learly, our district courts, which are our courts of original trial jurisdiction,
are not so limited in deciding the issues in “cases originally docketed” in
those courts. They are our principal courts of record in which is vested the
power to find facts. They also have the power to form conclusions based
upon those facts, and to enter enforceable judgments, orders and decrees
supported by those facts and conclusions.

Carlsbad Irrigation Dist., 87 N.M. at 151-52, 530 P.2d at 945-46. The Carlsbad Irrigation
District Court commented further that “[n]o limitations have been placed by law upon the
power of our district courts in these appeals to find facts, make conclusions of law and enter
such judgments, orders and decrees as are proper to dispose of the issues.” Id. at 152, 530
P.2d at 946.

C. ANALYSIS

{23} In determining whether the Sixth Judicial District Court has “jurisdiction to hear all
matters either presented or which might have been presented to [the State Engineer] as well
as new evidence developed since the administrative hearing[,]” we are constrained by the
water code’s statutory provisions. When interpreting statutes, “we seek to give effect to the
Legislature’s intent, and in determining intent we look to the language used and consider the
statute’s history and background,” Key v. Chrysler Motors Corp., 121 N.M. 764, 768, 918
P.2d 350, 354 (1996) as well as the plain meaning of the language. State v. Moya,
2007-NMSC-027, ¶ 6, 141 N.M. 817, 161 P.3d 862. When a statute is clear and
unambiguous, we interpret it as written. State v. Jonathan M., 109 N.M. 789, 790, 791 P.2d

12
64, 65 (1990). If, however, the statute’s language is ambiguous, we must interpret the statute
and determine legislative intent. State ex rel. Helman v. Gallegos, 117 N.M. 346, 353, 871
P.2d 1352, 1359 (1994). The primary indicator of the Legislature’s intent is the plain
language of the statute. Gen. Motors Acceptance Corp. v. Anaya, 103 N.M. 72, 76, 703 P.2d
169, 173 (1985). Statutes are enacted as a whole, and consequently each section or part
should be construed in connection with every other part or section, giving effect to each, and
each provision is to be reconciled in a manner that is consistent and sensible so as “to
produce a harmonious whole.” Key, 121 N.M. at 769, 918 P.2d at 355. If the result of
adopting a strict construction of the statutory language would be “absurd” or “unreasonable,”
then we interpret the statute “according to its obvious spirit or reason.” D’Antonio v. Garcia,
2008-NMCA-139, ¶ 6, 145 N.M. 95, 194 P.3d 126 (quoting Moya, 2007-NMSC-027, ¶ 6)
(internal quotation marks omitted).

{24} The general purpose of the water code’s grant of broad powers to the State Engineer,
especially regarding water rights applications, is to employ his or her expertise in hydrology
and to manage those applications through an exclusive and comprehensive administrative
process that maximizes resources through its efficiency, while seeking to protect the rights
and interests of water rights applicants. See Aamodt, 111 N.M. at 5, 800 P.2d at 1062 (“The
legislature granted the State Engineer broad powers to implement and enforce the water laws
administered by him.”); see also NMSA 1978, § 72-2-1 (1982) (providing that the State
Engineer “has general supervision of waters of the state and of the measurement,
appropriation, distribution thereof and such other duties as required”); NMSA 1978, § 72-2-
8(H) (1967) (providing that “[a]ny regulation, code or order issued by the state engineer is
presumed to be in proper implementation of the provisions of the water laws administered
by him”); NMSA 1978, § 72-2-9 (1953) (providing that “[t]he state engineer shall have the
supervision of the apportionment of water in this state”); § 72-5-1 (providing that the sole
means for acquiring a water right is to “make an application to the state engineer for a permit
to appropriate, in the form required by the rules and regulations established by him”). An
exclusive and comprehensive administrative process is one that provides for a “‘plain,
adequate, and complete means of resolution through the administrative process to the
courts.’” U.S. Xpress, Inc. v. N.M. Taxation & Revenue Dep’t, 2006-NMSC-017, ¶ 12, 139
N.M. 589, 136 P.3d 999 (quoting Chavez v. City of Albuquerque, 1998-NMCA-004, ¶ 14,
124 N.M. 479, 952 P.2d 474). The “exclusivity of any statutory administrative remedy turns
on legislative intent.” Barreras v. N.M. Corr. Dep’t, 2003-NMCA-027, ¶ 9, 133 N.M. 313,
62 P.3d 770. Factors assessed in determining such intent “include the comprehensiveness
of the administrative scheme, the availability of judicial review, and the completeness of the
administrative remedies afforded.” Id. at ¶ 11. The comprehensive nature of the water
code’s administrative process, its mandate that a hearing must be held prior to any appeal
to district court, and the broad powers granted to the State Engineer therein clearly express
the Legislature’s intent that the water code and the administrative process it describes
provide a complete and exclusive means to acquire water rights. In light of this purpose, the
water code’s history, and this Court’s precedent, we now consider the meaning of the
statute’s de novo provision.

13
{25} Lion’s Gate’s application for a permit to appropriate water was rejected because the
State Engineer summarily found, in a pre-hearing determination, that no water was available
to appropriate. Whether water is available for appropriation is the threshold issue that is
dispositive of a permit application when water is not available for appropriation. The
Legislature, in creating an efficient and effective administrative process for water rights
applications, recognized the dispositive nature of this threshold issue when it crafted New
Mexico’s water code and mandated in Section 72-5-7 that the State Engineer “shall”
summarily reject water rights applications upon a determination that water is unavailable for
appropriation. Reading Section 72-5-7 harmoniously with Section 72-2-16, therefore, we
conclude that the Legislature intended the State Engineer to employ his or her authority to
efficiently dispose of applications without a hearing whenever he or she determines that
water is unavailable to appropriate. However, an “aggrieved” applicant may request a post-
decision hearing before the State Engineer if that request is timely, but no appeal can be
made to district court “until the state engineer has held a hearing and entered his decision
in the hearing.” Section 72-2-16.

{26} If the State Engineer makes a pre-hearing determination that water is unavailable for
appropriation, secondary issues that must otherwise be considered before a permit to
appropriate water can be granted become irrelevant, because the State Engineer is required
to reject the application without reaching those issues. Section 72-5-7; see also §§ 72-5-5
and -6. Examples of such secondary issues include whether the proposed appropriation is
contrary to the conservation of water or would be detrimental to the public welfare or to an
objecter’s water right. Section 72-5-6. The effect of such an initial finding, therefore, is to
limit the State Engineer’s adjudicative jurisdiction over the application.

{27} This statutory requirement is clear and logical. From a determination that water is
unavailable for appropriation follows the inevitable conclusion that any appropriation of
water under these circumstances would be contrary to the conservation of water and
detrimental to public welfare and prior water rights. As a result, those issues need not be
reached by the State Engineer. Accordingly, after an initial finding that water is unavailable,
the State Engineer is prohibited by statute from scheduling a Section 72-5-6 hearing, which
is necessary only if the State Engineer initially determines that water is available for
appropriation and otherwise finds that reasons for rejection provided in Section 72-5-7 are
inapplicable. For the same reason, upon a pre-hearing or summary determination that water
is unavailable to appropriate, the State Engineer is barred from reaching any of the secondary
issues when an aggrieved applicant subsequently requests a Section 72-2-16 hearing, which
is required by statute to perfect an appeal to the district court. Secondary issues become
relevant and can be considered only if water is available to appropriate and if they have no
bearing on the threshold issue of water’s availability.

{28} Lion’s Gate claims to be aggrieved by the State Engineer’s refusal to consider these
secondary issues, and contends that because it was denied the opportunity to argue the
secondary issues before the State Engineer at a requested Section 72-2-16 hearing, these
secondary issues should be considered by the district court on appeal according to the de

14
novo provisions of Section 72-7-1. Lion’s Gate forcefully argues that the history of Article
XVI, Section 5 and Section 72-7-1(E), construed together with our precedent, requires this
Court to hold that the district court can properly consider all issues pertinent to its
application for a permit to appropriate water as if the district court had original jurisdiction
over the matter. Lion’s Gate goes so far to say that what Article XVI, Section 5 of the New
Mexico Constitution and Section 72-7-1 provide for is an appeal “in name only” because the
statute “reiterates the Legislature’s and the people’s intention that the case be treated anew
and as an original action.” (Emphasis added.) Lion’s Gate urges us to apply its fabricated
principle that “a district court acquires complete jurisdiction over an administrative matter
when a dispositive order is appealed to it.” However, this cannot be what was intended by
the water code or Article XVI, Section 5, nor does this contention accord with the purpose
or the exclusive and comprehensive nature of the water code and the administrative process
described therein. Reading Section 72-7-1 to equate a de novo scope of appellate review
with a district court’s original jurisdiction, as Lion’s Gate would require, would render much
of the water code and the administrative and remedial process it lays out superfluous,
because then an appeal of any decision, act, or refusal to act on the part of the State Engineer
could bring issues that the State Engineer had not yet considered before a district court for
an initial determination. In addition, it would allow a water rights applicant to have the full
merits of its application originally heard before a district court, rather than before the State
Engineer.

{29} A harmonious reading of the water code with Article XVI, Section 5 limits the
district court’s scope of appellate review to a de novo consideration of issues within the State
Engineer’s statutorily-defined jurisdiction. This avoids the “absurd” and “unreasonable”
result that would ensue if water rights applicants, seeking a more favorable outcome, could
transform district courts into general administrators of water rights applications by forcing
district courts, rather than the State Engineer, to consider on appeal the merits of their
applications. We do not find that such usurpation of the State Engineer’s authority and
jurisdiction under the water code was the intent of Article XVI, Section 5, Section 72-7-1,
or our precedent. Lion’s Gate’s approach would defeat the administrative process for water
rights applications designed and articulated by the Legislature. Because “we refrain from
reading statutes in a way that renders provisions superfluous[,]” State ex rel. Regents of
ENMU v. Baca, 2008-NMSC-047, ¶ 10, 144 N.M. 530, 189 P.3d 663, we cannot allow such
an overly broad interpretation.

{30} The purpose of the language contained in Article XVI, Section 5 and the 1971
amendment to Section 72-7-1, providing that appeals are to be de novo, “as cases originally
docketed in the district court,” was not to give the judiciary de facto original jurisdiction
over water rights applications. As we have already discussed, that would create a short
circuit in the administrative process, thereby frustrating the purpose of the water code and
its broad grant of power to the State Engineer to oversee and administer water rights
applications. Rather, the purpose of that language was to simply overrule the holding of
Kelley, as this Court acknowledged in Carlsbad Irrigation District, 87 N.M. at 151-52, 530
P.2d at 945-46, and to emphasize that district courts are not limited to a record review of the

15
State Engineer’s actions or to the standard of review provided under Rule 1-074(R). To that
end, the district court can hear new and additional evidence and form its own conclusions
based upon that evidence. In addition, its review of a State Engineer’s decision is neither
limited to questions of law nor restricted to determining whether the State Engineer acted
arbitrarily or capriciously. Finally, the district court’s review is not limited to whether a
State Engineer’s action was substantially supported by the evidence or whether the action
was within the scope of the State Engineer’s authority.

{31} Lion’s Gate complains that this approach subjects water rights applicants to a
“procedural morass” of never-ending administrative proceedings and the prospect of years
of judicial review, because the State Engineer would have authority to consider an
application to appropriate piecemeal, forcing an applicant to appeal each issue individually.
The purpose of Article XVI, Section 5 and Section 72-7-1 in providing for de novo appeals,
Lion’s Gate argues, is to provide the means to overcome a piecemeal approach to the
application process. We acknowledge the potential problem if every issue relevant to a
water rights application could be partitioned by the State Engineer and litigated in isolation.
Indeed, such a process, if put into practice, would completely defeat the purpose of creating
an administrative agency to efficiently handle the complex and esoteric process of water
rights applications. We do not find that this is the Legislature’s intent, nor is it what the
water code provides. Only when the State Engineer makes an initial determination that
water is unavailable to appropriate is the State Engineer, and consequently the district court,
jurisdictionally limited to consideration of that issue. Otherwise, following a determination
that water is available to appropriate, the State Engineer must consider the full merits of an
application and every constituent issue would be reviewable de novo on appeal. Therefore,
under the statutory scheme created by the Legislature, no threat of an endless administrative
morass looms, as Lion’s Gate suggests. Rather, the morass in which Lion’s Gate now finds
itself is one that is almost entirely of its own making. The district court recognized that both
parties contributed to procedural delays, but it was Lion’s Gate that proclaimed that it would
“litigate every issue” in the hearing, and then commenced to make good on that threat by
filing multiple, premature appeals to the district court, resulting in a delay of several years
to the resolution of the administrative process in this case.

{32} In a worst case scenario, from the perspective of a water rights applicant, the State
Engineer could make a summary determination that water is unavailable for appropriation.
The applicant would then request a Section 72-2-16 hearing before the State Engineer, who
would be jurisdictionally limited to that dispositive, threshold issue. The applicant could
then appeal the State Engineer’s post-hearing finding on that issue to the district court, which
would then reconsider, de novo, whether water is available. Upon a finding favorable to the
applicant, the district court would then remand to the State Engineer to consider the
application on its merits and for recommencement of the application process, including
notice publication and a Section 72-5-6 hearing.

{33} This approach is entirely consistent with the seminal holding of Farmers’, 18 N.M.
at 9-10, 133 P. at 106, interpreting the original de novo provision of New Mexico’s water

16
code. Farmers’ does not stand for the proposition that district courts can consider de novo
the full merits of water rights applications on appeal after the State Engineer makes a
summary determination that no water is available to appropriate and does not reach the
merits. Rather, Farmers’ accords with our holding in this case that district courts are limited
to review of the threshold issue of whether water is available when the State Engineer makes
a summary determination that it is not, but that the district court must consider the full merits
when the State Engineer determines that water is available.

{34} In Farmers’, the State Engineer, implicitly finding that water was available to
appropriate, “ordered notice to be given . . . of a hearing on said application[.]” 18 N.M. at
4, 133 P. at 104. Accordingly, the Farmers’ Court held that the water code allows the
district court to hear on appeal “such competent proof as may be offered by the parties
interested in the proceeding[s], and form[] [an] independent judgment relative to the issues
involved.” Id. at 9, 133 P. at 106 (emphasis added). In that case, because the State Engineer
had already considered the merits of the application, the district court, as required by de
novo review, was “necessarily required to determine, for itself,” each constituent issue
relevant to the application on which the State Engineer had declined to act: “whether there
was unappropriated water available; whether the approval of the application would be
contrary to the public interest, and all other questions which the engineer was required, in
the first instance, to determine.” Id. In other words, under Farmers’, the water code’s de
novo standard constrains appellate review to “the issue presented[.]” Id. Because adoption
of Article XVI, Section 5 and the subsequent amendment of Section 72-7-1 were intended
to overrule Kelley, which had itself overruled Farmers’, we interpret the intent of both the
constitutional amendment and the legislative amendment to the water code to indicate a
purpose to return to the holding of Farmers’, which we construe narrowly. This approach
conforms with our recent holding in Smith v. City of Santa Fe, in which we cautioned against
actions that “would foreclose any necessary fact-finding by the administrative entity,
discourage reliance on any special expertise that may exist at the administrative level, [or]
disregard an exclusive statutory scheme for the review of administrative decisions[.]” 2007-
NMSC-055, ¶ 15, 142 N.M. 786, 171 P.3d 300.

{35} As its final argument, Lion’s Gate relies to a great extent on commentary culled from
this Court’s opinion in Carlsbad Irrigation District, 87 N.M. at 151-52, 530 P.2d at 945-46.
In Carlsbad Irrigation District, after describing the holding, we stated that

[c]learly, our district courts, which are our courts of original trial jurisdiction,
are not so limited in deciding the issues in ‘cases originally docketed’ in
those courts. They are our principal courts of record in which is vested the
power to find facts. They also have the power to form conclusions based
upon those facts, and to enter enforceable judgments, orders and decrees
supported by those facts and conclusions.

Id. The Carlsbad Irrigation District Court further stated that “[n]o limitations have been
placed by law upon the power of our district courts in these appeals to find facts, make

17
conclusions of law and enter such judgments, orders and decrees as are proper to dispose of
the issues.” Id. at 152, 530 P.2d at 946 (emphasis added). Lion’s Gate finds support in these
passages for its contention that the district court’s jurisdiction is, in effect, unlimited on de
novo review and that it can hear all issues that could have been before the State Engineer.
We disagree. The dicta in Carlsbad Irrigation District simply emphasizes that the restrictive
holding of Kelley no longer applies and the district court is not limited to a record review,
but is free to find facts, make conclusions of law, and enter such judgments, orders, and
decrees that it determines are necessary to dispose of the issue(s) decided by the State
Engineer.

III. CONCLUSION

{36} The statutory procedure for administering water rights applications created by the
Legislature provides for a streamlined administrative process whereby the State Engineer
can summarily dispose of applications when water is unavailable for appropriation. The
process is balanced to preserve administrative and judicial resources and protect the rights
and interests of applicants, the public, and prior appropriators. To construe the water code
provisions as Lion’s Gate would have this Court construe them would upset that balance,
shifting the burden of the administrative process to the judiciary and diminishing the
gatekeeper role of the State Engineer. Further, it would potentially and unnecessarily
involve the public and prior appropriators before any third-party interests are implicated by
a State Engineer determination that water is available to appropriate.

{37} For the reasons stated herein, we reverse the district court’s ruling and remand for
further proceedings consistent with this opinion.

{38} IT IS SO ORDERED.

____________________________________
EDWARD L. CHÁVEZ, Chief Justice

WE CONCUR:

____________________________________
PATRICIO M. SERNA, Justice

____________________________________
PETRA JIMENEZ MAES, Justice

____________________________________
RICHARD C. BOSSON, Justice

____________________________________

18
CHARLES W. DANIELS, Justice

Topic Index for Lion’s Gate Water v. D’Antonio, No. 31,270

AL ADMINISTRATIVE LAW AND PROCEDURE
AL-AA Administrative Appeal
AL-JR Judicial Review
AL-LI Legislative Intent
AL-SC Scope of Review

AE APPEAL AND ERROR
AE-AJ Appellate Jurisdiction
AE-CF Certiorari
AE-IA Interlocutory Appeal
AE-RM Remand
AE-TN Trial de Novo

CT CONSTITUTIONAL LAW
CT-NM New Mexico Constitution, General

GV GOVERNMENT
GV-SE State Engineer

JD JURISDICTION
JD-DC District Court

NR NATURAL RESOURCES
NR-WL Water Law

ST STATUTES
ST-IP Interpretation
ST-LI Legislative Intent
ST-RC Rules of Construction

19